How many times have you made a financial decision that backfired in the end? Maybe you intended to be helpful or the decision was made quickly, without thinking about negative ramifications. Whatever the initial circumstance, you regretted your decision later.

Think twice before you find yourself in the following situations:

Lending money to a family member or friend

According to a recent article in Forbes, nearly three-quarters of people who borrow money from friends or family never pay the loan back in full. Often these loans are by parents lending money to adult children. Chances are that when you lend money to a family member or a friend, you will never see the money again. Only lend what you’re comfortable losing. Instead of expecting to get paid back, consider it a gift.

If someone is asking you for money, evaluate the situation before committing. Here are a few questions to ask yourself:

Have I lent this person money before, and did they pay me back?

Is this an emergency?

Why are they coming to me instead of going to a bank?

Will the loss of this money affect my finances?

If they don’t pay me back, how will our relationship be affected?

Are they willing to sign a note for the loan, with market-rate interest?

Leasing a vehicle instead of purchasing ears

When you lease a car, you will have lower monthly payments than if you finance a car with a loan. You can transition to a new car every two to three years by simply returning the car back to the dealer at the end of your contract.

Unfortunately, you will not own the car when the lease expires. And you will need to refinance the debt or pay off the outstanding balance if you want to keep the car when the contract has reached full term. Also, you will be penalized if you terminate your lease early, exceed the allotted annual mileage (usually 12,000 miles) or damage the vehicle through excessive wear and tear.

Co-signing on a lease or loan

Co-signing a lease or loan for a family member or friend seems honorable but may have consequences. When you co-sign, you are responsible for the entire amount. Can you afford the monthly payments if the co-signee defaults? Have you thought about the effect on your credit if the person doesn’t pay on time? And you may be declined for future credit because your debt is too high or because your credit score has dropped due to late payments.

Adding an authorized user to your credit card

You may be helping someone with poor or no credit by offering access to your credit card. This good intention can quickly turn ugly, especially if your card is at the limit or the payments are not made when due. Ultimately, you’re responsible for the debt and will reap the negative repercussions.

Paying for your child’s education

As parents, we often feel that we are responsible for our children’s education even when we can’t afford it. If you did not fund a 529 Plan for your child and are now facing the reality that your teenager is about to attend college, discuss strategies with your child that will not have negative implications on your retirement. You do not want debt that will take years to pay off. Your child has his or her lifetime to repay outstanding student loans; your timeline is much shorter.

Discuss the following options with your child:

Taking advanced placement classes in high school with the goal of testing out of future college classes

Living at home while attending a local college

Attending community college prior to transferring to a four-year university

Applying for grants and scholarships

Working to pay for school

Applying for student research positions

Completing the FAFSA (fafsa.ed.gov) to determine what types of government aid are availableHolding an investment to avoid capital gains

If you are holding one stock in a taxable account that is a disproportionate amount of your portfolio to avoid capital gains, be careful with this approach. You may be tax-averse but could be positioning yourself for a future disaster should the value of the company quickly decline. You might want to sell some of the stock in order to create a diversified portfolio or gifting the stock to charity.

Delaying saving for retirement

This often means that you will be working well into your later years. There is not a simple solution if you are in this situation. If you are over 50 and have not established a retirement account or the one that you have is dangerously underfunded, take the time to meet with a financial advisor to implement a strategy. If you wait any longer to fund your retirement, you may have ignited a fire that you will never be able to extinguish.

Before committing to financial decisions that could negatively affect you in the long term, evaluate your position and think about your personal finances if the action backfires. Don’t be afraid to place your needs first, and learn to say no when it’s in your best interest.

Teri Parker CFP, is a vice president for CAPTRUST Financial Advisors. She has practiced in the field of financial planning and investment management since 2000. Reach her via email at Teri.parker@captrustadvisors.com

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